Discretionary improvements – considerations for landlords

Before making discretionary improvements to your properties there are a number of key points to consider if you wish to recoup the cost from your leaseholders, as the property management experts at Brady Solicitors explain.

A recent case emphasised the difference between a landlord’s obligation to carry out repairs and their discretion to carry out improvements. Where a landlord makes discretionary improvements to a property, they must take into consideration the leaseholders’ interests, their views on proposals for major works and the potential financial impact on them.

The London Borough of Hounslow v Waaler

Ms Waaler, a leaseholder of one of the flats, applied to the First-tier Tribunal for a determination on the reasonableness of significant works carried out to her block by the Council, following a service charge demand for the costs of the works.

The works included replacing the original wooden-framed windows with new metal framed units. This item was particularly contentious as it necessitated the replacement of the external cladding and removal of asbestos, despite the windows not being in disrepair.

The FTT held that the Council was entitled to recover the claimed service charge.

An appeal at the Upper Tribunal, however, concluded that although the Council had an obligation under the lease to carry out repairs, any improvements were a matter of choice and therefore discretionary. Where a landlord decides to carry out a scheme of works which includes discretionary improvements, he “must take particular account of the extent of the interests of the lessees, their views on the proposals and the financial impact of proceeding.”

As the works to the windows were considered to be discretionary improvements, the Upper Tribunal decided that only part of the amount claimed was reasonable.

The Court of Appeal upheld the decision of the Upper Tribunal and confirmed the points that landlords must take into account when carrying out discretionary improvements:

The extent of a leaseholder’s interest, which can be measured by the remaining unexpired term of their lease.

Leaseholders’ views should be more influential where improvements are being undertaken (given that a landlord is exercising a discretion), although the landlord is not bound by those views.

Considering the financial impact of the works does not require the landlord to investigate the financial means of particular leaseholders however, in broad terms, “the landlord is likely to know what kinds of people are lessees in a particular block”.

Repairs or improvements?

The Hounslow v Waaler case underlines a landlord’s duty to carry out necessary repair works on their properties, but that’s not to say that improvements shouldn’t also be made. As long as landlords show that they have properly considered the interests, views and financial impact of their leaseholders, they can reasonably recoup the costs of the improvements.

Expert major works advice

If you are unsure as to whether your planned works are fulfilling your legal obligations of repair or if they are likely to be considered discretionary improvements, contact Brady Solicitors’ property management experts for advice.

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